March 24, 2020 / 1:13 PM / in 14 days

UPDATE 1-Hungarian central bank holds rates, expected to announce QE-type measures

* Base rate stays at 0.9%, overnight depo rate -0.05%

* Decision in line with analysts’ forecasts

* Bank to release statement at 1400 GMT

* Bank to hold news conference at 1430 GMT

By Krisztina Than and Gergely Szakacs

BUDAPEST, March 24 (Reuters) - Hungary’s central bank left interest rates unchanged on Tuesday, as projected, and is expected to announce unconventional measures such as quantitative easing (QE) to support local banks and help the private sector weather the coronavirus pandemic.

The National Bank of Hungary (NBH) has already boosted short-term market liquidity via its FX swaps and broadened the range of permissible collateral with corporate loans, helping the country’s banks. The government has imposed a blanket moratorium on all loan repayments through end-2020.

In Central Europe, the Czech, Polish and Romanian central banks have cut interest rates to help economies as recession fears escalated. The pandemic has wrought havoc on the global economy, prompting big car makers to halt production at their factories in Hungary.

“All kinds of QE-type unconventional measures could be on the table,” Citigroup analyst Eszter Gargyan said before the NBH meeting on Tuesday. “The measures ... (could) aim to support local banks’ capacity to absorb the shock hitting the private sector and potentially boosting their capacity to buy local government bonds as the fiscal financing need widens.”

The NBH has already said it would consider resuming its mortgage bond buying programme to curb borrowing costs.

In a March 16-19 Reuters poll, 13 of 15 economists said the NBH would leave its base rate steady at 0.9%. One analyst projected a 10-basis-point reduction, another expected a 15-basis-point cut.

Before the coronavirus pandemic escalated globally, the Hungarian central bank, which has been the most dovish in Central Europe, was under pressure to act to contain accelerating inflation. This is no longer the case, with the economy heading into a likely recession, some analysts said.

“Whether or not this virus disruption ends up producing an inflation spike, near-term, because of supply shortage, it is generally accepted that central banks are cutting rates to support the economy at this time, not fighting inflation,” Commerzbank analysts said in a note.

The NBH will publish fresh inflation and GDP forecasts and a statement at 1400 GMT. Deputy Governor Marton Nagy will hold an online news conference at 1430 GMT about the Monetary Council decisions.

The forint, which sank to record lows near 360 versus the euro last week, traded around 352.51 after the rate decision on Tuesday, unchanged from levels before the announcement. (Reporting by Krisztina Than, editing by Larry King)

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